1. Field of the Invention
Embodiments of the present invention relate generally to the field of weather-risk management. More specifically, embodiments of the present invention allow a user to customize a virtual weather-data station so that weather-risk products can be customized and generated responsive thereto.
2. Description of Related Art
Many businesses face economic risks associated with weather. Conventional weather-risk management tools are extremely technical (i.e., accessible only to experts), require long periods of time for statistical analysis, or are characterized by substantial basis risk (i.e., the location of the weather monitoring location is distant from the location of the business at risk). Several attempts have been made by others to offer an automated, real-time, weather-risk management systems for the sales of weather derivatives. For example, various internet sites have marketed weather-index-based derivatives, but none of these have offered an intuitive user interface to customize the configuration of weather derivatives; a user-controlled, automated multiple-weather-station basis; a user-controlled, automated multiple-risk basis; and the ability to close the sale of a weather-risk derivative over the internet.
In further detail, conventional systems for weather-risk management exhibit several disadvantages that limit the ability of a weather-risk product to accurately reflect the actual weather-related risk for a particular land area relating to the coverage of the weather-risk product (“a covered area”). Such disadvantages relate, most generally, to the fact that weather-risk products are, conventionally, generated based on historical weather readings at a point (e.g., a weather station) that may not accurately reflect the weather risk for a covered area not congruent with that weather station. The difference between the historical weather readings at such a weather station and the actual weather (historical or future) for the covered area can be referred to as “basis error.” The potential for basis error is disadvantageous for both the buyers and sellers of weather-risk products because the terms of an error-based weather-risk product may favor one party or the other depending on the nature of the basis error. A weather-risk product buyer, for example, may suffer by paying a higher premium or by not receiving payment (i.e., settlement) for coverable weather events due to basis error. And on the other hand, a weather-risk product seller or provider, for example, may suffer by receiving a lower premium from the buyer or by over-paying for coverable weather events.